Renewables set to push up utility bills

Firms and households are facing significantly higher electricity bills over the next five to 10 years as consumers shoulder the cost of renewable energy targets.

Analysts estimate that households are already paying up to £10 extra a year through their utility bills to subsidise alternative forms of energy.

At an energy conference in Edinburgh last week policymakers admitted that the financial burden on households and businesses will only increase as governments push to achieve ambitious renewables targets.

Scotland has set out to source 50% of its electricity from renewable sources by 2020, with an interim target of 31% by 2011. Westminster wants wind farms, tidal power and other alternative supplies to account for 20% of the UK's electricity generation by 2020.

Energy analysts say renewables are currently heavily subsidised and unless efficiency levels improve, firms and households could find themselves paying a heavy price for the changes in energy policy. They argue that in Scotland, the potential burden on consumers strengthens the argument for a more balanced form of energy production in future - including clean coal and nuclear.

Speaking on behalf of energy minister Jim Mather last week, Colin Imrie, deputy director of the Scottish Government's energy department, said: "It's clear that costs are going to have to be borne by the consumer. That is recognised at the European level, the UK level and the Scottish level."

Euan Robson, Scottish representative for the Renewable Energy Foundation, also confirmed: "Consumers are already paying for renewables. Current estimates are that UK consumers are paying £8-10 per annum per household for what is being generated from renewables at the present time What will happen is as more renewables come on to the system, what is being paid by the consumer will rise."

This will come as bad news for fuel poverty campaigners who continue to argue for a windfall tax on energy firms. Trade unions and consumer groups question why utility firms are allowed to hike household and business bills when they continue to post vast profits.

Also speaking at last week's conference, organised by Scottish Engineering and the union Unite, Mike O'Brien, minister of state at the Department of Energy and Climate Change, hinted the Government was unlikely to clamp down on energy profits as it needed utility companies to invest in new technologies and infrastructure.

He said if investors are going to put "mega bucks" into new technologies such as carbon capture and storage, and wind power, "they will want to make profits".

He added: "Begrudging a fair profit will mean the investment and jobs will go elsewhere."

Pressure is mounting on Alex Salmond's administration to reverse its anti-nuclear stance amid fears over the intermittency of renewable sources such as wind, and the possibility that Scotland will lose thousands of highly skilled jobs when the current fleet of traditional power stations is retired.